IPads, iPhones and Square coming to NYC taxis in 30 cab pilot program

Last week, Jack Dorsey was attempting to break CMT/Verifone’s point of sale stranglehold on the New York City taxi cabs with his Square mobile payment system. On Thursday, the Taxi and Limousine Commission (TLC) agreed to give Dorsey and his upstart credit card processor Square a chance with a pilot program.

The pilot program will be limited to 30 of NYC’s 13,237 taxis and will last for a year. The program will install iPads in the backseat of the taxis, replacing Creative Mobile and Verifone’s Taxi TVs. Taxi driver’s will also have iPhone’s installed in the front of the car in order to process credit-cards, view traffic data and more. Dorsey pointed out on his Twitter account that his favorite feature of the NYC taxi cab deal is the ability to swipe credit cards at anytime during a trip, instead waiting until the end.

The Square proposal initially shot for 50 cabs in the pilot program, and did not specify iPads as the tablet to replace the Taxi TVs; riders would be able swipe credit cards, as well as use the iPad for other functions. TLC chairman, David Yassky, noted that the move would create opportunities to present riders with access to games, computer applications like Foursquare, payment totals, location tracking, and be presented with a variety of taxi themes and other content.

The proposal was initially challenged by Creative Mobile Technologies (CMT), citing the same security questions Verifone levied against Square back in March 2011; that the Square payment system would allow riders’ information to be easily skimmed. General counsel for CMT, Jeffrey L. Wilson, also pointed out that both Verifone and CMT had to undergo more than six months of testing their product before taxi passengers were allowed to swipe credit cards. Currently, the two companies each cover half of all credit card payments in taxis for New York City; an industry that handled 55 percent of the gross revenue for NYC taxis in January 2012.

In reply to Creative Mobile’s concerns, the commission has allowed a similar, parallel pilot for CMT and Verifone. Each company will be allowed 30 taxis as well for their programs, though details are sparse on the Square competitors’ plans.

New York City’s taxicabs are iconic; they even based a TV series on the Medallion taxis, set in the city. However, Square is no stranger to the back of taxicabs; the reader is apparently used by drivers in Baltimore, Orlando, Portland and San Francisco. Dorsey’s mobile payment system could be the shakeup that the NYC taxi industry needs. According to Bhairavi Desai, founder of an NYC cabdrivers’ group, drivers are charged 5 percent on every credit card transaction (though TLC points out that CMT/Verifone charges 3.5 percent), but Square promises 2.75 percent.

TLC chairman Yassky was also pleased with the deal, saying, “the more competition, the better.”

Some TLC commissioners still have doubts Square’s security measures; VeriFone’s attack in March centered on the fact that Square’s reader doesn’t ecrypt credit information. While VeriFone has sought the recall of Square’s readers, it may be worth noting that, security-wise, NFC has taken the most recent image-hit with the Google Wallet hack. Yassky pointed out that credit card security research has come a long way since Verifone and CMT were being considered for fare POS, saying, “there’s a lot that we don’t have to figure out going forward.”